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September 29, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz
...

Oz. Pick of the gold stocks, at least on a percentage basis, was Saracen (SAR), a local producer with a low profile. It added A6 cents to A49.5 cents after reporting a solid 57 per cent rise in gold reserves at various mines in Western Australia, and is now sitting on a proven 1.1 million ounces. The company also generated a spot of North American investor interest after delivering a well-received report at the Denver Gold Forum.

Troy (TRY) was another of the small group of gold companies to move higher by a reasonable amount. It added A23 cents to A$4.96.

Other gold companies to gain ground included Perseus (PRU), up A7 cents to A$2.91, Newcrest (NCM), up A24 cents to A$29.14, Papillon (PIR), up A13 cents to A$1.75, Regis (RRL), up A26 cents to A$5.71, Alacer (AQG), up A24 cents to A$7.01, OceanaGold (OGC), up A17 cents to A$3.21, and St Barbara (SBM), up A5 cents to A$2.16.

Shareholders in Cortona (CRC) were also better off as it moved up A1 cent to A10 cents after announcing a friendly merger with Unity Mining (UML), which also crept up A1 cent to A14 cents.

Minews. Not much to write home about in that lot.

Oz. Agreed. The stocks to lose ground also did so by relatively small amounts, which is why last week was really one to forget. One of the heaviest falls in the week was posted by Doray Minerals (DRM) which upset its supporters by announcing a A$31 million capital raising to brings its Andy Well project into production. It fell by A13 cents to A82.5 cents.

Other downward moves came from Kingsrose (KRM), down A3 cents to A$1.17, Ampella (AMX), down A7 cents to A70 cents, Kingsgate (KCN), down A5 cents to A$6.04, Medusa (MML), down A13 cents to A$6.06, Tanami (TAM), down A11 cents to A78 cents, and Intrepid (IAU), down A4.5 cents to A47 cents.
...

Source >> www.minesite.com
 
October 01, 2012
The Fundamentals For Copper Will Be Strong For Several Years, As Net Supply Struggles To Keep Up With Demand
By Rob Davies

It is party conference season in the UK - a time when politicians exhort companies to invest more and “help” the country. What many of them have failed to realise is that the UK is now really just a large market place for raising and allocating capital in the most efficient way.

Nowhere is that better demonstrated than in the mining industry.

First, the UK is home to the London Metal Exchange, whose quality in terms of transparency and ease of price discovery looks even better after the revelations of price fixing in the Libor market.

Secondly, the London Stock Exchange is by far the most important stock market for mining companies, hosting, as it does, six of the largest mining companies in the world.

These companies can raise money in the UK, as Glencore did last year at its IPO, and then direct the funds to where they are needed.

In mining that might mean copper mines in Peru to supply the still rapidly growing Chinese economy. Or it might mean any number of other options.

Politicians and think tanks still fail to understand that this sort of activity is far more profitable than encouraging widget makers in Borsetshire to make stuff to export to Shanghai.

According to Bloomberg the current average cash cost of producing a pound of copper is US$1.49. That is equivalent to US$3,385 a tonne.

But compare that to the cash quote for copper on Friday of US$8,172 a tonne. A gross cash margin of US$4,887 a tonne or 60 per cent, has to be pretty attractive in anyone’s language.

Not surprisingly these margins are attracting more capital to the industry and will, over time, increase capacity.

The problem is that building a copper mine is a time consuming and expensive business. Bloomberg estimates that it can cost anywhere between US$5,000 and US$30,000 a tonne of annual capacity to construct a new mine.

So depending on where the mine sits on that capex cost curve the depreciation charge can take a big lump out of the margin. Remember too, that some of this capital is required to replace declining output from mines that are being depleted.

Even so these encouraging numbers will result in a significant addition to net supply over the next eight years. The build up is quite slow to start with.

According to Bloomberg net supply will only increase by one per cent in 2012 to 16.476 million tonnes. Thereafter the additions are quite dramatic with a rise of 5.6 per cent forecast in 2013 and a rise of 9.2 per cent in the year after.

In 2015 the increase in net supply is expected to be 8.4 per cent, and then there’ll be a staggering jump of 10.3 per cent in 2016, before it tails off again into low single digit gains for the rest of the decade.

On these numbers global mine supply will be over 25 million tonnes by 2020.

One thing this rise in mine supply will do is to increase the pricing power of smelters to who process the concentrate. Sumitomo expects a 14 per cent increase in concentrate supply next year, but only an 11 per cent expansion in smelter capacity.

Consequently it is forecasting treatment costs and refining costs (TC/RCs) to rise from their current levels of US$70 and US$0.07 as smelters exploit their pricing power.

While politicians and think tanks agonise about how to cajole industries into spending money for the greater good, the mining companies are getting on with the job and following the numbers.

And that will eventually show through in valuations.

Source >> www.minesite.com
*****
 
October 06, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

...

Minews. Let’s start the price call with gold, because we’re all waiting for it to go back through the US$1,800 an ounce mark.

Oz. There was an upward trend in gold shares, as shown in that 1.2 per cent increase in the index. But the modesty of that rise was somewhat surprising, as the US dollar gold price gained ground and the Australian dollar fell back to US$1.02, meaning that in local currency the gold price rise was even stronger.

Among the best performers in the gold space was a company that has been off most radar screens for a few years, Haoma Mining (HAO). Haoma, which has been ASX-listed for 42 years, has spent the past few decades beavering away at the historic Bamboo Creek goldfield in Western Australia. Last week the company reminded the market that it is still around when it dashed up to a 12-month share price high of A19.5 cents after reporting excellent platinum and palladium grades from tailings left by previous gold miners.

The plan is to process about one million tonnes of tailing to extract remaining precious metals using a new metallurgical process. After setting its price high, Haoma slipped back to A17.5 cents, a gain of A7 cents for the week.

After that spot of excitement there was a long list of moderately good rises, and quite a few companies which lost ground, or didn’t move at all. Among the more notable risers were: Silver Lake (SLR), up A23 cents to A$3.87, Endeavour (EVR), up A18 cents to A$2.37, Papillon (PIR), up A13 cents to A$1.88, St Barbara (SBM), up A11 cents to A$2.27, Troy (TRY), up A9 cents to A$5.00, Northern Star (NST), up A8 cents to A$1.28, Perseus (PRU), up A7 cents to A$2.98, Saracen (SAR), up A5.5 cents to A55 cents, Doray (DRM), up A8 cents to A89 cents, and Cobar (CCU), up A7 cents to A67.5 cents.

Among the gold companies that fell were Intrepid (IAU), down A1 cent to A46.5 cents, Olympus (OYM), down A1.5 cents to A20.5 cents, and Ausgold (AUC), down A1.5 cents to A26.5 cents. The sector leader Newcrest (NCM) shed A2 cents to A$29.12, and while that is an insignificant fall, whatever Newcrest does has a disproportionate effect on the gold index.
...

Source >>> www.minesite.com
 
October 06, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to be rising as your economy retreats.

Oz. That’s not a bad comparison. The trend in all sections of the stock market last week was up, with industrial shares and banks leading the way. The all ordinaries index added 2.4 per cent, and while miners lagged a little they still ended in the black. The metals and mining index rose 1.8 per cent, and the gold index rose by 1.2 per cent. In the wider economy there was a cut in official interest rates in preparation for what are expected to be a couple of tough years ahead as the mining boom runs out of puff.

Minews. If the boom is ending why is your market rising?

Oz. Investors, it seems, are looking forward to a return to normality, because while the mining sector has dominated in Australia for the past 10 years other sectors have suffered.

Fortunately, there is plenty of room for conventional stimulus such as lower interest rates and a lower exchange rate to kick start the industries sidelined during the mining boom. Manufacturing, tourism, and retail have most to benefit from the changing economic landscape.

Minews. In other words a conventional economic cycle of the sort we’re not seeing in Europe or the US.

Oz. It seems so. Mining and oil will remain the backbone of the Australian economy, but they depend largely on the forces of international supply and demand, and there’s nothing to be done there, other than wait for prices to settle and see who’s afloat and who’s not. The fact the Australian mining industry is fairly close-knit means that as one part of it falls another picks up the slack. At the moment, people losing their jobs in iron ore and coal are being quickly snapped up by copper, gold and liquefied natural gas construction projects.
...
Source: www.minesite.com
 
World Bank cuts 2012 Asian growth forecast from 7.6% to 7.2%.
The 2013 estimate was lowered from 8.0% to 7.6%.
 
October 08, 2012
Gold Finds Favour With Bond Holders, Estate Agents And Equity Investors As Quantitative Easing Rolls On
By Rob Davies

Autumn is the season of mellow fruitfulness, and October is the most popular month for a financial crash, according to the Financial Times.

It is not hard to find a reason for being worried, as any reader of the financial media can attest.

This time though, there is the big difference between 1907, 1929, 1987 and the other five times the US stock market has fallen more than 10 per cent in the month.

Right now everyone is expecting things to get worse. In at least some of those previous crashes the event came out of a clear blue sky.

Despite this chronological concern, commodities have generally speaking made good progress over the week. Base metals, as measured by the LME index, gained 1.3 per cent to 3,572, while gold edged up 0.4 per cent to US$1,782 an ounce.

To a certain extent both those rises reflected the 0.5 per cent decline in the dollar. US jobs data, although good, was perceived as not good enough.

But in fact it is still Europe where the largest worries are. Europe’s declining economic activity was blamed directly by Vale of Brazil for its decision to cut iron ore pellet production by 18 per cent, since Europe is the destination for the majority of its output.

Australia mostly supplies China and the rest of Asia. Even so, the 25 basis point interest rate cut by the Royal Bank of Australia to 3.25 per cent shows that even the lucky country is not immune.

While the news on iron ore might be disappointing, there is better news for gold bugs.

Historically, gold investors and bond holders have been the cat and the dog of the financial world. While one thinks all governments are venal the other thinks advocates of gold still live in the financial Neolithic.

So it is quite a surprise to read that Pimco, the largest bond investor in the world, now thinks that all portfolios should have some exposure to gold.

It comes up with some dodgy mathematics to impute a value a US$2,500 an ounce for all of the 155,000 tonnes of gold ever mined, on the basis that there are US$12.5 trillion of sovereign physical and electronic currency reserves.

This rather sweetly overlooks the basic point that a major reason for the crisis is that no one believes these reserves provide anything like enough strength in depth, and probably fall short by a factor of ten.

The gold bandwagon also drew support from the rather surprising direction of an upmarket estate agent in London.

It too discovered it owned a calculator and revealed that although it cost the equivalent of 24,000 ounces of gold to buy a super-prime house in London a decade ago, the same property could now be acquired for only 9,800 ounces.

In other words, gold has done a better job of preserving wealth against inflation than property.

The same estate agent also helpfully pointed that that this amount of gold was equivalent in size to a small foot stool, albeit a very heavy one. Yes - 304.78 kilogrammes to be precise.

Now that the financial floodgates of quantitative easing have been fully opened in the US, labelled by some as QE Infinity, and with the ECB also embarking on the same path there seems little to hold gold back.

What better time for labour relations in South Africa, still the second largest producer, to take a sharp turn for the worse as Amplats fires 12,000 platinum miners?

Source >> www.minesite.com
*****
 
October 13, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market doesn’t seem to have moved at all last week.

Oz. It was probably the flattest week in several years. Both the all ordinaries and the metals index closed almost precisely where they started. Gold was the only sector to show a significant trend, and that was down. The ASX gold index lost three per cent, as the gold prices slipped by US$25 an ounce, and the Australian dollar refused to obey the country’s central bank by falling. In fact, the Aussie dollar rose slightly during the week before retreating. It also finished where it started.
...

Source >> www.minesite.com
*****
 

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